What Is Upcoding in Medical Billing?

Be Aware of this Fraudulent and Costly Practice

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Upcoding is fraudulent medical billing in which a bill sent for a health service is more expensive than it should have been based on the service that was performed. A upcoded bill can be sent to any payer—whether a private health insurer, Medicaid, Medicare, or the patient. 

While it is not the norm by any means, upcoding can occur when you receive diagnostic services, medical procedures, or visit your healthcare provider. The consequence of upcoding is an increased cost of health care for everyone because the government and private payers distribute the cost of healthcare among everyone.

Billing Codes

Each diagnostic test, office visit, or medical procedure performed by a doctor or other healthcare provider has a corresponding Current Procedural Terminology (CPT) code set by The American Medical Association (AMA).

When your hospital sends a bill to your payer, that CPT code corresponds to the procedure, and different procedures and services have higher or lower costs. While the code doesn't directly translate to the payment, the hospital payment should be accurate as long as the bill contains the correct code.

How Upcoding Happens

When a hospital upcodes, this means that the billers assign a code for a more expensive service or procedure than the one that was performed.

For example, a simple x-ray may be billed as a more complex x-ray, including more views than those that were actually done. Sedation may be billed as more complex anesthesia, or a procedure that was done by an assistant or nurse may be billed as if it was done by the doctor.

Why Upcoding Happens

Upcoding is illegal, but there are hospitals and health care providers who have been caught doing it. Administrators who run healthcare systems can benefit professionally when their profits are impressive, and upcoding is one way to make that happen by cheating the system.

Some medical practices fraudulently upcode, reaping hundreds of thousands, or even millions of dollars.

Sometimes, doctors, nurses, and advanced practice providers who are employed are unaware that their own services are being upcoded if malicious employers are secretive about billing.

Upcoding Costs Consumers Money

The most substantial effect of upcoding is the increased cost to health payers—which they pass on to consumers.

When government payers end up paying excessive dollars for healthcare, this is reflected in taxes and in governments budgets. When health insurance companies overpay, they increase the cost of healthcare premiums to consumers as a way to offset the monetary loss.

What to Do If You Suspect Upcoding

If you are concerned that the hospital where you receive your medical care is guilty of upcoding, there are some steps you can take to make sure your payer has not been billed fraudulently. You can start by checking your Estimate of Benefits (EOB) to see what services your health payer is being billed for and if they match up to the services you remember receiving.

If you think there is a problem with your bill, you can take action:

  • First, contact your provider and ask about it. They can either explain to you why it is correct, they may offer to correct it, or they may be just as disturbed by the discrepancy as you are.
  • Keep in mind that your doctor is not in charge of billing you for services that you were referred to—if a lab or diagnostic facility billed you for services that were not the same as the services you received, be sure to let your doctor know, as he or she may stop referring to that facility.
  • Consider calling a diagnostic facility or lab where you had your tests done to see if there is a reasonable explanation for your bill.
  • If your EOB completely doesn't make sense, and if you believe fraud is at play, inform your health care payer about your concern.
  • If your payer is a private insurer, then call their customer service line and ask to whom you should report upcoding fraud.
  • If you receive Medicaid, you'll need to check with your state's Medicaid office to see how they want upcoding or other fraud reported.
  • If your payer is Medicare, you'll find the steps for reporting fraud, including upcoding, at the Medicare website.

A Word From Verywell

Unfortunately, hospitals, healthcare providers, and diagnostic facilities have been caught upcoding. This can result in the firing of administrators or even jail time. Often, however, those who are most skilled at these types of illegal activities are able to hide behind systemic malfunctions or bureaucracy to avoid being blamed for the problems.

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